Hybrid or convertible stocks refer to financial instruments that have characteristics of both debt and equity. The most common form is a convertible preference share or convertible bond—an instrument that initially functions like a fixed-income security (paying regular interest or dividends) but can be converted into ordinary equity shares at a predetermined price after a specified period or upon the occurrence of a defined event. In India, convertible instruments are used by companies—especially startups and growth-stage businesses—to raise capital from investors who want downside protection through the fixed-income feature while retaining the option to participate in equity upside.
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